An extremist, not a fanatic

September 21, 2015

The outcome bias

Diego Costa has something in common with George Osborne. I don't just mean the obvious. I mean that both could be beneficiaries of a common cognitive error - the outcome bias.

Some observers are praising Costa for engineering Gabriel's sending off. "There is barely a team on the planet who would not benefit from Costa's streetfighting approach" says Oliver Kay in the Times. "He deliberately and skilfully got an opponent sent off" says Barney Ronay in the Guardian. "This was wasn’t a mugging. It was a heist, and an expert one." And Arry Redknapp adds that "you would like to have him in your team."

However, if the game had been reffed properly, Costa would have been red-carded and so Gabriel, having nobody to kick, would have stayed on the pitch. That might have cost Chelsea the game. We would not then be hearing praise for Costa, nor talk from Mourinho about emotional control.

In this sense, what we're seeing is the outcome bias. Costa's behaviour looks good not because it was skilful but because he had the good luck of having Mike Dean as ref. As Daniel Kahneman has written:

Hindsight bias has pernicious effects on the evaluations of decision-makers. It leads observers to assess the quality of a decision not by whether the process was sound but by whether its outcome was good or bad. (Thinking Fast and Slow, p203).

The outcome bias, he says, can "bring undeserved rewards to irresponsible risk seekers." Maybe Costa was one of these: he recklessly risked getting sent off himself.

This bias is a common one. It's common to praise bosses of successful companies, without asking whether that success was because of the CEO's decisions or just luck:Alex Coad's finding that corporate growth is largely random, and Ormerod and Rosewell's claim that bosses can't predict the effects of corporate strategy both suggest that we understate the latter. Here's Kahneman again:

Because luck plays a large role, the quality of leadership and management practices cannot be inferred reliably from observations of success.

A similar thing might happen in medicine: doctors get excessive praise for lucky but correct diagnoses and too much blame for reasonable but wrong ones.

Which brings me to Osborne. Some of his supporters regard the decent growth we've had had since 2013 as evidence that austerity worked. This too, is an example of the outcome bias - interpreting a bad decision as a good one simply because it eventually led to a happier outcome. But as Simon says, this is absurd:

Imagine that a government on a whim decided to close down half the economy for a year. That would be a crazy thing to do, and with only half as much produced, everyone would be much poorer. However, a year later when that half of the economy started up again, economic growth would be around 100 per cent. The government could claim that this miraculous recovery vindicated its decision to close half the economy down the previous year. That would be absurd, but it is a pretty good analogy to claiming that the recovery of 2013 vindicated the austerity of 2010.

There is, though, a problem here. The outcome bias isn't wholly stupid; as I've said, cognitive biases persist because they have a grain of usefulness. In an uncertain world, it's impossible to foresee the effects of choices and so it's hard to judge the quality of a decision at the time - especially if we don't know the decision-maker's information set. A good outcome might then alert us to the possibility that there was more wisdom in the decision than we thought at the time. I don't think this applies to Osborne's austerity - mainstream economics told us at the time that it was a bad choice - but it might apply to Costa. Maybe he judged that Mike Dean would not take a big decision to favour Arsenal and so thought he could get away with his behaviour. If so, praise for him is warranted. Sometimes, it's hard to distinguish between rational and lucky behaviour.

Comments

Wenger said "In every game he has aggravation and he gets away with it because of the weakness of the referee. We knew before the game he is only looking at that."

Surely Wenger is correct in his analysis because he has taken a large sample size and deemed that Costa gets away with it more than he gets sent off, therefore making Costa's approach correct, whereas you have only analysed a single game.

So I suspect this is more an example of the Arsenal bias than the outcome bias. I appreciate you've pointed this out in your last sentence.

Yes, not only that but many decisions like a CEOs are taken spur of the moment. In which case, a person's instinctive decision making isn't a reflection on much either way.

Best to look at long term results. That is, Costa got a guy sent off but will he turn into Torres or bite someone?

Likewise, Osborne has his private credit/housing boom going, but the bust will come before the end of the next government perhaps.

The lesson in government seems to be to stim the economy through credit expansion and hopefully get out before the house falls down by the time the next one gets in. Carney and Osborne sitting in a tree - deregulation, buy to let and QE QE.

How much does Costa really differ from the widely maligned Luis Suarez except in that he seems to get away with it? By my count (and just watching highlights on MOTD) he committed at least half-a-dozen bookable offences and one that should have got a straight red. And I'm not an Arsenal fan.

I think this is less the outcome bias and more the influence of dominant media narratives. I recall when Costa arrived last season he was feted as both "ideal for the English game" (i.e. thuggish) and "ideal for Chelsea" (i.e. manipulative). Journos admiring his gamesmanship is of a piece with their admiration for Mourinho's mind-games.

I suspect these narratives do subliminally influence the officials. While Chelsea as a team are assumed to be calculating, leading to repeated warnings, Arsenal have a reputation for petulance, leading to quick cards. While we're pretty average in terms of fouls, our ratio of fouls to yellow cards is low, while we now have the joint record of most reds in EPL history. That Santo Cazorla, eh? Bloody psycho.

Referees have odd attitudes when it comes to players (and teams) with 'reputations'. They were very indulgent with Robbie Savage, who usually had to commit a dozen fouls before getting booked, while Lee Cattermole only has to breath on someone now to get a card. I tend to think that managers who complain about refs a lot do get things their own way eventually, as refs hesitate to make important decisions and err on the side of caution to avoid controversy.

Britain was a world leader in reliable nuclear plants and they have served us well for decades. Lack of UK foresight, perverse market ideology and sustainable investment means we have lost all the skills and know-how once built up. Skills that could have been put to earning substantial profits from design and build of overseas plants. The French who understand that public works are an asset not a liability have kept their skills and advanced them. They are cleaning up as Osborne has no one else to turn to. Even worse he is allowing the Chinese to learn these skills and then supply plants all over the World, whilst we sit idly by milking the public for ever increasing energy costs.

“A decision was wise, even though it led to disastrous consequences, if the evidence at hand indicated it was the best one to make, and a decision was foolish, even though it led to the happiest possible consequences, if it was unreasonable to expect those consequences.” –Herodotus